How to settle a debt with low income
If you do not earn a lot of money or barely get enough, paying a debt may seem impossible. People fall into debt for different reasons. Regardless of having credit cards accumulated due to past financial mistakes, student loans, medical expenses or others, debt can feel like an overwhelming burden. However, did you know that it is possible to settle a debt with low income? It may not always be easy, but with determination and dedication, you can liquidate it, save money and improve your financial situation.
We give you a guide so you can settle a debt with little income.
Create an emergency fund
You may be too hasty to pay your debt. However, having an emergency fund should be the first objective. Without an emergency fund or financial budget, any unexpected cost can derail the debt payment process.
Maybe the car breaks down and needs repairs, or a service payment is bigger than budgeted. In any case, when emergencies arise, money is needed, and fast.
Then, start your emergency fund with a separate savings account. In this way you will not be tempted to use it for your day to day. If you feel it is heavy, start with small amounts. To settle a debt with little income, it is advisable to set aside 10% of your salary for this fund.
Develop a budget of “minimum needs”
A “minimum needs” budget covers only your most basic living expenses, such as rent, pantry and debt payment. You must be pretty basic and all non-essential expenses.
To start the budget, you must first determine the cost of your daily expenses. These are invoices that can not be cut: bills that must be paid each month, such as rent, food and utilities.
As you create your budget, see if there is any way you can work to reduce your bills. You can reduce the budget by using coupons or by subscribing to a store rewards program. Maybe you can consider cutting the cable to save money. Every little bit helps. The goal of a minimum budget for needs is to release as much money as you can. Every peso that you have to spare can be used to settle a debt with little income.
To start, budget in a spreadsheet or use a budget application. Remember: no matter how you choose to track your money, the most important thing is to establish a budget and stick to it.
Set goals and responsibility
You can not succeed on your own. Without solid objectives and responsibility, it is much less likely to settle debts.
In fact, in a study conducted by psychology professor Gail Matthews of the Dominican University, it was discovered that sharing objectives is the key to achieving them. In his study, Matthews found that people who scored their goals and had an accountability partner were 76% successful in achieving their goals. In comparison, there was another group in the study that was instructed to think only about individual goals. Only 43% of those people achieved their goals.
Therefore, it is advisable to write down objectives following the Mrs. Grundy method. With this method, your objectives meet the following criteria: (Specific) specific, (Measurable) measurable, (Achievable) attainable, (Relevant) relevant and (Timely) timely. Once you have developed your Mrs. Grundy goals, share them with your partner or friends. This can help you organize and settle your debt with little income.
Focus on increasing your income
Reducing your expenses certainly helps you pay your debts faster. But unfortunately, there’s not much you can cut back.
The best way to settle a debt with little income and quickly is to cut costs and increase revenue at the same time. Then, use the released cash to issue additional payments towards the debt. There are thousands of ways you can increase your income. For you, maybe that means finding a better paid job. Or, you can start working in spare time to generate additional income each month. These are just some ideas to start:
- Drive in a transport service app
- Start blogging or independent writing.
- Have a garage sale
- Cut the grass
- Have a seasonal job
Once you start earning more money, put the whole amount of extra money for your debt. You’d be surprised how much faster you can progress when you can put $ 100, $ 500, or even $ 1,000 more per month for your debt.
Do not blame yourself
Even if you are taking all the right steps, it can take years to settle a debt with little income. To remain in the payment of long-term debt, it is imperative that you give a small break from time to time. Liquidating a debt with little income does not mean that you have to enslave.
The idea here is to give you a small month of absence without fault. Because it is already in your budget, this is money that you can spend freely without feeling sorry. The concept of a financial allocation is very similar to a diet. People are more successful when they allow a day of rest and a deceptive meal once a week. It prevents them from feeling deprived and prevents large and impulsive purchases later.
Then, factor a little free spending on your budget. Whether it’s a movie outing or a night out with friends. The choice is yours to enjoy … without guilt, of course.
Improve your financial situation
Paying the debt is not easy, especially with a small income. But with guts, hard work and a lot of commitment, it is possible to live a life free of the burden of debt. Are you ready to follow these 6 steps and start paying off your debt with little income?